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Report cites gap between exec pay, FTSE 100 company performance

A third of FTSE 100 companies have dissonance between executive pay and performance, a report from CGLytics shows.

In its annual proxy review published Wednesday, the analytics and intelligence firm said the average total shareholder return for FTSE 100 companies decreased to 8% in 2017 from around 12% in 2016. During the same period average total CEO compensation increased 5.5% to 4.9 million ($6.3 million).

In 2017, companies with the largest pay vs. return misalignments were WPP PLC, CRH PLC and Sky Ltd., respectively. On a three-year basis, Shire PLC had the widest such gap, followed by Lloyds Banking Group PLC and WPP respectively.

According to the Investment Association, which maintains a public register of resolutions on executive remuneration, the number of resolutions opposing individual director re-elections increased 47.5% to 80 in 2018 compared to 2017.

Within that list there were six FTSE 100 companies: The Berkeley Group Holdings, AstraZeneca PLC, Barratt Developments PLC, Sky, Royal Mail and British American Tobacco.

"The 2018 proxy season saw a clear focus on key governance matters by investors. With the landscape growing increasingly complex, boards need to ensure they have access to the same level of information as their shareholders," Aniel Mahabier, the founder and CEO of CGLytics, said in a news release.

"As a result, boards can expect a number of trends in the coming proxy season, such as increasing demands for transparency and continued scrutiny on CEO pay, ESG, board diversity. ... Investors are expecting boards to be more proactive in their shareholder engagements and spark more timely and open dialogue around aspects of governance before they become a problem," Mr. Mahabier said.